2008 (6) TMI 177 - AT - Central Excise

Allegation of clearance without payment of duty shortage of grey fabrics Director and merchant-manufacturers admitting the clandestine removal - Mere entry in RG 23A Part-1 or Part-2 register does not prove the utilization of grey fabrics in the manufacture of processed fabrics and the dispatch of the same on payment of duty demand on ground of clandestine removal is justified

Summary

Issues:
1. Shortage of grey fabrics found during a preventive check.
2. Allegation of clearance of processed fabrics without payment of duty.
3. Confirmation of central excise duty demand and penalty.
4. Appeal against rejection of appeals filed by the appellants.
5. Validity of confessional statements and evidence presented.
6. Delay in issuing show cause notice and its impact on limitation period.

Issue 1: Shortage of grey fabrics found during a preventive check.
The central excise authorities discovered a shortage of 1,82,702 L.Mtrs. of grey fabrics during a preventive check at the unit. The missing grey fabrics were identified to have been received from merchant manufacturers and processed fabrics valued at Rs. 27,83,610/- were cleared without payment of duty. The Director admitted to this discrepancy in his statement, leading to the demand of central excise duty and penalties against the appellants.

Issue 2: Allegation of clearance of processed fabrics without payment of duty.
The appellants contested the clearance of processed fabrics without duty payment, arguing that the grey fabrics' receipt was duly entered in the register, making the clearance unauthorized. They claimed that the statements of the Director and merchant manufacturers were coerced and manipulated, questioning the validity of the evidence presented by the prosecution.

Issue 3: Confirmation of central excise duty demand and penalty.
After due adjudication, a demand for central excise duty of Rs. 2,78,261/- was confirmed against the appellants, along with an equal penalty under Section 11AC. The penalty was also imposed on the Director and the merchant manufacturers involved in the case.

Issue 4: Appeal against rejection of appeals filed by the appellants.
The appeals filed by the appellants were rejected, leading to further legal proceedings challenging the decision. The appellants reiterated their arguments before the Adjudicating Authority, emphasizing discrepancies in the investigation process and the validity of the evidence presented against them.

Issue 5: Validity of confessional statements and evidence presented.
The Department relied on the statements of the Director and merchant manufacturers to establish the case. The Tribunal emphasized the evidentiary value of such statements, stating that retractions without proof of coercion do not invalidate the evidence. The appellants' failure to provide concrete evidence linking the grey fabrics to processed fabrics led to the rejection of their defense.

Issue 6: Delay in issuing show cause notice and its impact on limitation period.
The appellants raised concerns regarding the delay in issuing the show cause notice, arguing that it was issued beyond the permissible time frame. The Tribunal referred to relevant legal precedents to determine the calculation of the limitation period under Section 11A, emphasizing the need to work backward from the date of the show cause notice. Ultimately, the Tribunal ruled against the appellants, citing the time bar as a reason for rejecting their appeals.

This detailed analysis of the legal judgment highlights the key issues, arguments presented, and the Tribunal's decision on each aspect of the case.